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Temperature shocks and their effect on the price of agricultural products: panel data evidence from vegetables in Mexico

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Listed:
  • Arellano Gonzalez Jesus
  • Juárez-Torres Miriam
  • Zazueta Borboa Francisco

Abstract

In this paper, we estimate the effect of temperature shocks on the price of nine vegetables with a high contribution to Mexico's non core inflation. We utilize monthly panel data of the price index of each vegetable at the city level which we combine with high resolution weather data of the producing states. For every city, we construct a relevant temperature measure by weighting the different temperatures of its supplier states using historic production shares and distance. Our findings elicit a convex U-shaped relationship between temperature and vegetable prices and a high sensitivity of the latter to contemporaneous and lagged temperature shocks that occur within their growing period. Our findings also suggest that temperature shocks may have a detrimental effect on vegetable yields which may be an important driver of the impact on prices.

Suggested Citation

  • Arellano Gonzalez Jesus & Juárez-Torres Miriam & Zazueta Borboa Francisco, 2023. "Temperature shocks and their effect on the price of agricultural products: panel data evidence from vegetables in Mexico," Working Papers 2023-02, Banco de México.
    • Handle: RePEc:bdm:wpaper:2023-02
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    References listed on IDEAS

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    More about this item

    Keywords

    Food Inflation; Weather Shocks; Vegetable Prices; Local Markets;
    All these keywords.

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • Q15 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Land Ownership and Tenure; Land Reform; Land Use; Irrigation; Agriculture and Environment
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming

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